You won’t hear the Chancellor boasting about the biggest drop in living standards since the war

The young have been hurt the most by the recession. They don’t vote Tory and can’t buy a house, so who cares?

Share

Last week I appeared on Iain Dale’s LBC radio show to discuss an interview he had just conducted with the Chancellor George Osborne on a trip to the South-west. Iain managed to get Osborne to repeat the dumbest statement that I have ever heard from a Chancellor – that is ‘four years ago the country was close to bankruptcy’. Such a claim that the country was broke is unequivocally false. A big fat pork pie.

In the quarter the Coalition took office in 2010 the economy grew by 1 per cent, which is the fastest quarter of growth since 2007. The economy grew by an average of 0.6 per cent a quarter from the final three months of 2009 to the third quarter of 2010 compared with an average of only half of that in the fourteen quarters since then. The UK – with its own central bank and currency – has been able to borrow at historically low rates throughout the recession under both Labour and coalition governments and was never anywhere close to being insolvent. Imagine if the chief executive of any of the biggest 500 companies in Britain declared that their company was close to bankruptcy when it wasn’t – or even if it was – they would be relieved of their duties.

As I have frequently predicted in these columns, real wages continue to plunge. The latest ONS data showed that. Average weekly earnings were £478 a week, down from £479 in December 2013 and exactly the same as observed in April. Pay was up 0.3 per cent over the last twelve months, which is the lowest ever, and exactly zero in the five months that we have data for since the start of 2014. We have now had monthly estimates of £478 in January, February, April and May and one of £476 in March so there isn’t much growth there. In contrast the Retail Price Index grew 2.6 per cent over the last year, so real wages are currently falling at more than 2 per cent per annum. The AWE is up by 6.5 per cent since May 2010 while the RPI is up 14.6 per cent. So real wages are now down 8 per cent and that drop has no chance of being restored by election time. I do recall the Bank of England’s ex-chief economist Spencer Dale explaining at the last inflation report press conference that the MPC was fully expecting real wage growth in the second half of 2014, a claim recently repeated by Governor Carney who is headed back to the drawing board.

Elsewhere the news is little better. There was new evidence from a recent study published by the Department for Work and Pensions* showing how Iain Duncan Smith’s much hated bedroom tax had further hurt living standards of the vulnerable. The study found there was widespread concern that those who were paying the tax were making cuts to other household essentials or incurring other debts in order to pay the rent. More than half reported cutting back on household essentials and a third on non-essentials in order to pay their shortfall. A quarter said they had borrowed money, mostly from family and friends.

The UK’s younger workforce is struggling as well. The unemployment rate of those age 16-24 was 18 per cent compared with 5 per cent for those ages 25-49 and 4 per cent for those 50 and over. A report by the Institute of Fiscal Studies** confirmed that the young have been hurt the most by the Great Recession. They don’t vote Tory and have little or no chance of buying a house. So who cares? Actually, I do. I went back to Cardiff University to accept a Fellowship at the Business School graduation last week; my MSc thesis there in 1981 was about the scourge of youth unemployment.

The authors of the IFS Report noted that the recession and its aftermath have been much harder on the young than the old. The employment rate of those in their 20s has fallen, while employment among older individuals has not and real pay among older workers has fallen much faster than among older workers. As a result young adults’ real incomes have fallen much more than any other age group. Comparing 22 to 30 year-olds in 2013 with 2008, median household income fell by 20 per cent when housing costs are included. This compares with a fall of only 11 per cent for those aged 31 to 59. The fall in income for young adults since 2008 is entirely accounted for by lower employment and sharp falls in real pay for those employed.

The earnings falls among young workers, the study found, are partly due to lower hours of work including more part-time work – some of which is involuntary, as indicators of ‘under-employment’ have risen. Older workers want fewer hours young people want more. However, the hourly wages of youngsters have fallen particularly sharply. Median hourly wages fell by 11 per cent in real terms for employees aged 22–30 between 2008 and 2013, and by just 3 per cent for those aged 31–59. Just over a quarter of people aged 22 to 30 live with their parents, and this proportion rose by 2 percentage points during the Great Recession the study found. So fewer youngsters have been able to strike out on their own than in the past; a fast growing house price bubble has made that task even more difficult especially in the South-east and London.

Despite steady falls in the unemployment rate, living standards for the vast majority continue to drop like a stone. Indeed, the Coalition has another record, it is responsible for the sharpest deterioration in living standards of any post-war government. But you won’t hear the Chancellor boasting about that.

* ‘Evaluation of removal of the spare room subsidy’  DWP, July

** ‘Living standards, poverty and inequality in the UK, 2014,’ IFS

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Property Negotiator - OTE £20,000+

£16000 - £25000 per annum: Recruitment Genius: This family owned, independent ...

Recruitment Genius: Sales Administrator - Spanish Speaking

£17000 - £21000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - German Speaking

£17000 - £23000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - Japanese Speaking

£17000 - £23000 per annum: Recruitment Genius: If you are fluent in Japanese a...

Day In a Page

Read Next
Wilbur, the pig who thinks he's a dog (Dom Joly)  

My hilarious pet pig Wilbur is more popular than I am — so I'll let him bring home the bacon

Dom Joly
 

Amazon's new 'payment by the page' policy will just result in longer but likely worse literature

Katy Guest
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'